A recent ruling by the South Gauteng High Court has deemed it illegal for banks to take money out of your account to settle debts, unless you specifically authorise it to.

This comes after the National Credit Regular (NCR) took Standard Bank to court to challenge a practice known as “set-off”.

Previously, banks were allowed to deduct money from your account as soon as you get any income to pay debts you owe them (a house bond would be an example).  The exact amount the financial institution could take was also not regulated.

While the bank argued that it was an essential practice for debt recovery, Judge Raylene Keightley sided with the NCR’s argument that banks had privilege over other creditors, which meant that the consumer was left with no money to cover basic living costs. Essentially, it violates someone’s Constitutional right to property and dignity.

It was also found that the “set-off” practice undermined debt review, which allows an over-indebted person to apply to court for a rescheduling of debt repayments.  The NCR used an affidavit from a debt counsellor who found that “set-off” deductions can be devastating for anyone under debt review or administration to support their case.

The ruling was hailed as a victory for South African consumers.

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